The First Term - The economy



From the start of his presidency, Clinton found himself boxed in by apparent contradictions. On the issue that mattered most to him, the economy, he feared that his actions were making him neither a fiscally prudent New Democrat nor a traditional, socially conscious liberal as he was increasingly perceived, but something nebulously in between. "I hope you're all aware we're all Eisenhower Republicans," the president lamented to his economic advisers in April 1993 as his administration moved toward the old-line Republican establishment program of lower deficits, free trade, and supporting the bond market. Secretary of Labor Robert B. Reich warned that Clinton's economic program as described was even more backward-looking and made him "sound like Calvin Coolidge."

The government-activist side of Clinton's plan for the economy had diminished since he took office, while the deficit-reduction side became more prominent. First he abandoned the middle-class tax cut promised during the campaign at the first notice of larger-than-anticipated deficit projections. Next, a separate stimulus bill targeting money for job training, transportation, and technology was rejected by the Senate. It was the first warning signal that one-party dominance of the White House and Congress would not assure swift and cohesive legislative action.

When the larger economic package of which the stimulus had been a party finally reached a vote in August 1993, most of the spending increases for social programs were stripped from the bill and the administration's progressive plan to cut the deficit through a broad-based energy tax was abandoned in the face of strong opposition in the Senate. Instead, an increase in the federal income tax—campaigned against by Clinton—was inserted. A proposed increase in the corporate income tax was cut by half, and attempts to tighten tax breaks for U.S. corporations with plants and operations overseas was stopped.

Some progressive taxation elements remained. An estimated nine-tenths of new revenues came from the top 1 percent of the population, while the working poor benefited from the largest earned-income tax credit in history, a redistribution of wealth shifting sharply away from Reagan-era supply-side economics. But the measure as a whole was seen as more of a deficit-reduction plan than a liberal overhaul of the economy, and its amorphous nature made it difficult for the administration to define and sell to the public.

Congressional Republicans unanimously opposed the president's package, arguing that it raised taxes too much, cut programs too little, and would send the economy into decline. With small defections by liberal and conservative Democrats, the measure barely survived by two votes in the House on 5 August and passed the Senate, 51-50 the next day as Vice President Gore broke the tie.

This first test of the Clinton presidency produced ambiguous results. The predicted slump did not happen. Instead, the deficit shrank, interest rates fell, inflation slowed, home buying and job creation rose—a clear improvement in the nation's economic health for all Americans. Clinton got the credit, though the positive trend had begun before his term. But he emerged with political wounds. The almost straight party-line vote for the program under-cut his claim to be a centrist. And although most of the tax bite was taken out of the wealthy, as campaigner Clinton had promised, any tax increase irritated voters, many of whom had abandoned Bush precisely because he broke a pledge not to raise them. Moreover, Clinton now looked like an uncertain waverer between competing ideologies rather than a bold activist who would reinvigorate the economy. Polls showed that 55 percent of the voters disapproved of his economic stewardship and his overall ratings dipped accordingly to the lowest levels of any postwar president that early in a term.

Throughout this period, Clinton often lamented to his advisers that he was having difficult reaching the public with his message. But part of the problem lay in the lack of coherent policymaking at 1600 Pennsylvania Avenue, encouraged by Clinton's own disorganized style. The White House atmosphere he created was the same one in which he had always thrived: a cross between a college dormitory and a think tank, with a constant barrage of interesting people to talk to and policies to debate in a freewheeling, egalitarian style. The emphasis was on raw energy and brainpower more than strategic order.

What discipline there was at the White House came largely from Vice President Al Gore and First Lady Hillary Rodham Clinton. Their personalities were more structured than Clinton's, and they found that they could usually force him to stop deliberating and make a decision. Sometimes they found themselves competing for Clinton's time and attention. The president's wife, during the early days of the presidency, usually prevailed.





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